Its use of untrained actors to depict a vivid mix of fantasy and stark reality down on the Louisiana bayou helped it win prizes at the Cannes and Sundance film festivals. But Oscar-tipped indie drama Beasts of the Southern Wild has discovered that it does not always pay to be innovative: officials for the Screen Actors Guild have now deemed it ineligible for any of their awards.

Directed by first-time film-maker Benh Zeitlin, who set up a production company in the town of Montegut, Louisiana and recruited his cast from the local community, Beasts of the Southern Wild centres on six-year-old Hushpuppy and her father, Wink, who live in a fictitious bayou community known as "the Bathtub" which is under constant threat from rising waters. The film has won plaudits as an environmental and political polemic, with particular praise going to the actors who play Hushpuppy and Wink, Quvenzhané Wallis and Dwight Henry.

The film's producers had hoped to enter both for SAG prizes and the entire cast for the coveted Outstanding Performance by a Cast award, which is the body's equivalent of the Oscar for best film. However, it appears Beasts of the Southern Wild is ineligible because it broke the guild's rules on using only professional actors. SAG officials say Zeitlin should have complied with the terms of its low-budget feature agreement, which would have ruled out using Wallis, an untrained child, and local baker Henry, who had never acted before, without paying them the guild-approved rate.

Zeitlin's decision to use untrained actors is said to have been made for both creative – in terms of authenticity – and financial reasons: he was working to a modest $1.3m budget. In order to comply with the SAG regulations and gain entrance to the awards, the film would now have to retrospectively give extra payments to its main cast members, according to the Hollywood Reporter. The financial burden would fall on US distributor Fox Searchlight, UK distributor Studio Canal and their various international counterparts, all of whom are unlikely to be interested in paying more funds into a movie whose rights they have already purchased.

Zeitlin told the Hollywood Reporter he had no regrets. "Against all logic and planning, two incredible first-time actors won the lead roles in Beasts," he said. "I'm positive they both have long and amazing acting careers in front of them."